Popular practice puts landlords in jeopardy

by Jennifer Paterson on 31 Mar 2015
Ontario landlords charging their tenants a monthly all-in fee will find that utility prices and property taxes are far outpacing the guideline for rent increase in 2015 – is it time to put the onus for these costs on tenants?

“It puts a huge pressure on landlords who are paying utilities while at the same time unable to increase rent more than what’s been set by the Landlord and Tenant Board,” said investor Sahil Jaggi.

“The percentage of the increase in utilities is far more than what your rent can actually go up.”

Ontario’s guideline rent increase for 2015 is 1.6 per cent. In many cases, the prices of utilities, such as heat, electricity and water, are more than double that, while property taxes have risen by three per cent in the past year.

“A rental increase of 1.6 per cent doesn’t jive with utility increases and a rise in property taxes,” added Shannon P. Murree, an investor and sales representative at Re/Max Chay Realty.

“It’s so tough, especially in multi-unit properties. If you’re buying the property for positive cash flow, it throws off the calculations.”

Gillian Irving, an investor and founder of InvestInStudentRentals.com, used to have leases that included all utilities, but now she has a utilities cap each month. “If it is exceeded my tenants are required to pay,” she added. “I made this change because I have definitely been hit by some outrageously high bills.

"I had one student house that decided to turn on electric heaters in the non-insulated garage so they could have parties and smoke. Problem was, it was during the winter and I got slammed with a $400 electricity bill for one month.

"I also had a water leak go unreported for an entire billing cycle, so I got the shock of my life when I opened my $600 water bill.”

Another option is for the landlord to cover utilities for a set time limit, such as the first two or three years, suggested Jaggi.

“Investors should focus on getting the rent, and utilities should be the onus of the tenant,” he said. “Doing your homework in advance is important to ensure you’re not faced with a lot of costs that you can’t afford. And that happens in cases where you’re offering an all-in deal.”

Irving added: “I believe we all have a responsibility to watch how much energy we use. Charging tenants for their usage is an important first step in getting them to consider reducing their consumption.

"If the bills go down it is good for my wallet and the planet.”

 

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